Elixir Retires deUSD Amid Stream Finance Crisis
Decentralized finance (DeFi) liquidity provider Elixir has announced the permanent retirement of its stablecoin, deUSD, following the catastrophic collapse of its significant counterparty, Stream Finance. Stream’s financial troubles have led to an extensive asset loss, with the protocol now owing Elixir approximately $68 million.
Summary of Events
- Elixir has officially retired deUSD as it holds no value, ceasing all minting and redemptions in USDC.
- Approximately 80% of deUSD holders have received their compensation, but tokens held by Stream are not included in this figure.
On November 6, Elixir declared the termination of deUSD, emphasizing that it "holds no value" and has fundamentally been "sunset." Presently, the platform has committed to compensating all holders of deUSD and its derivatives through USDC. Users can navigate to the protocol’s website to claim their compensation by connecting their wallets. However, it’s noteworthy that holders on Sui and Sei blockchains, along with those in specific Automated Market Makers (AMMs) and Liquidity Providers, are currently excluded from this process.
Recent data from CoinGecko indicates that deUSD has dramatically depegged from the U.S. dollar, plunging in value to merely $0.026.
“deUSD holds no value and has been sunset. Please refrain from buying or investing in deUSD, including through AMMs,” urged the protocol.
So far, the firm has compensated about 80% of existing deUSD holders, a figure that notably doesn’t include Stream Finance’s holdings. Stream is reported to control roughly 90% of the remaining deUSD supply, meaning over 91.2 million deUSD tokens are still in circulation.
To facilitate this transition, Elixir has halted all minting and redemption operations affiliated with deUSD, with a pledge to phase out the stablecoin soon. The protocol reassured that any impacted Liquidity Providers in AMM pools or lending markets could recoup the full value of their positions.
Originally introduced in mid-2024, deUSD was positioned as a synthetic stablecoin, fully collateralized by staked tokens like stETH and sDAI. Its design aimed to rival other synthetic stablecoins prevalent in the market, such as USDe.
Why Elixir is Sunsetting deUSD
The catalyst for Elixir’s decision came just days prior, as Stream Finance faced a staggering $93 million loss in net assets, according to its external asset management personnel. The detailed circumstances behind this situation are still under analysis, with experts from the blockchain-focused law firm Perkins Coie LLP brought in to assist.
As a reaction, the protocol temporarily halted all withdrawals and deposits, and current pending deposits are also not being processed.
The fallout from this crisis is considerable; Stream is facing an estimated $285 million in debt owed to various lenders within the DeFi ecosystem, including Elixir’s $68 million. Notably, Stream had utilized deUSD to stabilize its beleaguered stablecoin, Staked Stream USD (XUSD).
As of November 7, the value of the XUSD has plummeted dramatically from $1 to just $0.17.
According to Elixir, Stream Finance still possesses about $75 million in deUSD, while a similar quantity is backed through a Morpho loan to Stream. The latter has reportedly opted not to settle or close its existing lending positions, which constitute over 99% of total on-chain lending positions. Consequently, Elixir has announced collaborations with Euler, Morpho, and Compound to manage the repayment of the Stream loan, proposing to liquidate the positions held by Stream in the process.
“We still believe this will be honored 1 for 1,” stated Elixir, maintaining a sense of optimism amidst the turmoil.
In conclusion, the retirement of deUSD marks a significant shift in the DeFi landscape, as the consequences of the Stream Finance crisis ripple through the ecosystem. Stakeholders are urged to stay vigilant as developments unfold, especially those directly affected by the retirement of this stablecoin.
